Southwest Knows How to Make Flyers Pay More Despite Bags-Fly-Free Mantra

Despite Southwest’s new commercial touting “Bags Fly Free” and free TV from the Dish Network, the airline generated 17% of its ancillary revenue last year from excess bag fees and AirTran’s bag fees.

In fact, Southwest’s ancillary revenue in 2012 grew 40.2% over the previous year to $1.65 billion, and that made Southwest the fourth largest collector of ancillary fee revenue behind United ($5.35 billion), Delta ($2.57 billion), and American Airlines ($1.98 billion) among 53 airlines around the world that disclose their numbers, according to a new report [pdf] from IdeaWorks Co.

Southwest’s ancillary revenue burst was built on growth in its Rapid Rewards frequent flyer program, EarlyBird priority boarding, and AirTran’s bag fees and frequent flyer program, the report says. Southwest acquired AirTran in 2011.

Here’s the breakdown in Southwest’s ancillary revenue in 2012:

Southwest/AirTran Fees in 2012

Source: IdeaWorksCompany, including DOT filings

Those were the 2012 numbers as ancillary revenue accounted for 9.7% of Southwest’s total revenue, IdeaWorks states.

And, chances are that Southwest’s 2013 ancillary revenue dollars will be even higher — unless it rapidly phases out AirTran’s bag fees as it integrates the two route networks.

That’s because in 2013 Southwest hiked AirTran’s bag fees, started hawking at the gate a $40 early boarding fee, and began charging for no-shows.

Despite Southwest’s ample ancillary revenue numbers in 2012, just as in 2011, the airline did not make IdeaWorks’ top 10 list of airline ancillary revenue on a per-passenger basis.

And other U.S. airlines took in a much higher percentage of their total revenue from ancillary fees in 2012.

In contrast to Southwest’s 9.7% of total revenue from ancillary revenue in 2012, Spirit (38.5%), Allegiant (29.9%), Alaska (14.5%), United (14.4%), JetBlue (11.8%) and Frontier (10.4%) were considerably more dependent on ancillary fees as a percentage of total revenue than Southwest.

Still, although the first two checked bags on Southwest fly for free, the airline has plenty of other fees to get you along the way.